Assessment of Tipping Practices at the Workplace from the Perspective of Labor and Social Security Law

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Can a Tip be Considered as Wages?

According to Article 32 of the Labor Law No. 4857, amounts paid in cash by the employer or third parties in exchange for work are considered wages. Therefore, tips given directly to the employee by the customer or collected under the employer's control can be considered part of the wages.

How Should Tips be Distributed Within the Workplace?

The key consideration here is the manner in which the tip is given and whether the employer is involved in this process. If tips are given directly by the customer to the employee without any record or control by the employer, the employer will have no responsibility for the payment of these tips.

However, if tips are paid under the control of the employer, different legal provisions will apply. According to Article 51 of the Labor Law No. 4857, in places like hotels, restaurants, entertainment venues, and similar establishments, money added as a percentage to the customer's bill or collected separately by the employer, as well as money voluntarily left by the customer to the employer or collected under the employer's control, must be paid in full to all employees working at the establishment.

Accordingly, the employer must document the distribution of the money collected as a percentage and the tips left by the customer or collected under the employer's control, ensuring it is distributed completely to the employees. In case of future disputes, the burden of proof will lie with the employer.

The procedures and principles regarding how the money collected from percentages is to be distributed among the employees, based on the nature of the work performed at the establishment, are determined by the Regulation on the Distribution of Money Collected from Percentages to Employees.

Are Tips Included in the Base Wage for Severance Pay?

Whether the tips are received directly by the employee or paid under the employer's control, they should be added to the monthly wage and considered in the calculation of severance pay. For employees who work solely for tips, the tip amount will be the base wage for severance purposes. In such cases, it becomes crucial to determine the tip amounts given directly by customers without the employer's control. One of the most frequent complaints from employers is being held responsible for tips they did not pay or know the amount of. In labor disputes, in the absence of written information and documents, the tip amount paid to the employee can be determined based on the employee's statement, industry experience, and investigations by relevant unions and chambers of commerce, and then added to the wage base for severance pay.

Can the Tip Amount Paid to the Employee be Considered as Overtime Pay?

Since the tip amount will also increase in the case of overtime work, the Supreme Court has deviated from the classic calculation in this matter. According to established Supreme Court precedents, in work arrangements where a tipping method is provided in addition to the guaranteed wage, two calculations are made for overtime pay based on the guaranteed wage and the tip amounts. Therefore, in calculating overtime pay, the result is obtained by multiplying the hourly wage calculated from the basic wage by 1.5 and the hourly wage calculated from the tips by 0.5 (half) with the overtime hours.

For example, let’s assume an employee has a gross fixed salary of 22,500 TRY in May 2024, received 2,250 TRY in tips, and worked 10 hours of overtime. In this case, the employee will be entitled to 1,500 TRY ((22,500/225)1.510 hours) based on the basic wage and 50 TRY ((2,250/225)0.510 hours) based on the tips, totaling 1,550 TRY (1,500 + 50 TRY) in overtime pay.

Are Tips Included in the Earnings Subject to Social Security Premium?

According to Law No. 5510, wages are defined as the gross amount paid in cash on an hourly, daily, weekly, monthly, or yearly basis with continuity. Therefore, if the employee's wage consists solely of tips, it will qualify as wages under social security law and be included in the earnings subject to premiums. A significant aspect here is that the tip amount given to the employee must not fall below the legal minimum wage. As stipulated in Article 39 of the Labor Law No. 4857, wages lower than the minimum wage cannot be paid to employees. In this case, the employer is legally obligated to make up the difference between the tip amount and the minimum wage.

On the other hand, especially in restaurant and dining establishments, employees may also work for a fixed salary plus tips (percentage). The scope of earnings subject to premiums is detailed in Article 80 of Law No. 5510. The earnings subject to premiums for insured individuals within the scope of paragraph (a) of the first clause of Article 4 of the law are determined as follows

In calculating the earnings subject to premiums;

1. The wages earned,
2. Payments made within the month from premiums, bonuses, and all kinds of similar entitlements, as well as amounts paid by employers for private health insurance and individual pension plans for the insured,
3. Payments made within the month to the insured based on decisions by administrative or judicial authorities as earnings specified in (1) and (2) above,

are taken as the gross total.

In the same article, paragraph (c) of the first clause lists the exceptions to the earnings subject to premiums one by one. There is no regulation within the paragraph content stating that tip payments are excluded from earnings subject to premiums. Therefore, when determining the scope of earnings subject to premiums, considering the provision in paragraph (c) of the first clause of Article 80, which frequently refers to all payments, regardless of their name, being subject to premiums except for the exceptions specified in paragraph (b), it is clear that tip amounts will be included in the earnings subject to premiums.

Conclusion

As detailed above, tips constitute an important element of the employment relationship, especially in local restaurants, hotels, and similar workplaces. The non-payment of tips by the employer, their unpredictability, and various other factors often lead to disputes in the employment relationship, frequently resulting in legal actions. Additionally, inspections by the Ministry of Labor and Social Security and administrative actions by the Social Security Institution can result in sanctions.

This uncertainty poses potential future risks for employers. Therefore, regardless of how tips are distributed (whether under the employer's control or paid directly by customers to employees), employers should take special measures in this regard. Internal workplace regulations should be established in accordance with the rules specified in the Law and regulations to ensure the distribution and recording of tips. These regulations should be fair, transparent, and acceptable to employees. Payments made in accordance with the fundamental principles of Labor Law and Social Security Law and current Supreme Court precedents should be documented, and necessary notifications to official institutions should be made accordingly.

Following these evaluations, a policy that meets the specified criteria and is implementable at the workplace can help maintain workplace harmony and prevent potential future sanctions against the employer.

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